Can Automatic Tax Increases Pay for the Public Spending Effects of Population Ageing in New Zealand?
AbstractThis paper examines the extent to which projected aggregate tax revenue changes, association with population ageing over the next 50 years, can be expected to finance expected increases in social welfare expenditures. Projections from two separate models, dealing with social expenditures and income tax and GST revenue, are used. The results suggest that the modest projected required increase in the overall average tax rate over the next 50 years can be achieved automatically by adjusting income tax thresholds using an index of prices rather than wages. Based on evidence about the New Zealand tax system over the last 50 years, comparisons of average and marginal tax rates suggest that such an increase may be feasible and affordable. The paper discusses the range of considerations involved in deciding if this automatic increase in the aggregate average tax rate, via real fiscal drag of personal income taxes, is desirable compared with alternative fiscal policy changes.
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Bibliographic InfoPaper provided by Victoria University of Wellington, Chair in Public Finance in its series Working Paper Series with number 2820.
Date of creation: 2013
Date of revision:
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Postal: School of Accounting & Commercial Law, Victoria University of Wellington, PO Box 600, Wellington, New Zealand
Phone: +64 (4) 463 5775
Fax: +64 (4) 463 5076
Web page: http://www.victoria.ac.nz/sacl/about/chair-in-public-finance
More information through EDIRC
Taxation; Aging population; Public spending; Fiscal policy;
This paper has been announced in the following NEP Reports:
- NEP-AGE-2013-07-15 (Economics of Ageing)
- NEP-ALL-2013-07-15 (All new papers)
- NEP-CWA-2013-07-15 (Central & Western Asia)
- NEP-PBE-2013-07-15 (Public Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Simon Loretz, 2008.
"Corporate taxation in the OECD in a wider context,"
Oxford Review of Economic Policy,
Oxford University Press, vol. 24(4), pages 639-660, winter.
- John Creedy & Grant M. Scobie, 2005. "Population Ageing and Social Expenditure in New Zealand," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 38(1), pages 19-39, 03.
- John Creedy & Grant M Scobie, 2002. "Population Ageing and Social Expenditure in New Zealand: Stochastic Projections," Treasury Working Paper Series 02/28, New Zealand Treasury.
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